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(Alliance News) - Large-cap stocks in Europe struggled in early dealings on Thursday, as traders await a policy decision from the European Central Bank and after gas supplies through the critical Nord Stream pipeline restarted.
The Nord Stream news calmed fears of an impending European energy crisis, the prospect of which had spooked markets on Wednesday. The extent to which gas from Russia has resumed flowing was unclear, however.
In London, the FTSE 100 was down 24.73 points, or 0.3%, at 7,239.58 early Thursday.
The FTSE 250 index, bolstered by strong corporate updates, rose 53.40 points, or 0.3%, at 19,453.24.
The AIM All-Share index added 1.09 points, or 0.1%, at 897.87.
The Cboe UK 100 index was down 0.4% at 722.12. The Cboe 250 was up 0.2% at 16,951.95, and the Cboe Small Companies was up 0.3% at 13,484.47.
In mainland Europe, the CAC 40 stock index in Paris and the DAX 40 in Frankfurt were both 0.1% lower.
The euro stood at USD1.0216 early Thursday in London, up from USD1.0202 at the European equities close on Wednesday. The ECB announces its latest interest rate decision at 1315 BST.
The bank had previously said it will hike interest rates for the first time since 2011 this meeting, tipping a 25-point rise off historic lows.
"A hike of 25bp is expected although there has been speculation that ECB policymakers may opt for a larger move of 50bp," analysts at Lloyds Bank commented.
"Given the prospect that interest rate rises may lead to a widening of euro area peripheral bond spreads, the ECB has promised to unveil a new anti-fragmentation policy tool. Markets will be hoping for some details on this today, including its size and how it would be deployed."
Against the yen, the dollar was trading at JPY138.53 early Thursday UK time, up slightly from JPY138.05 late Wednesday.
The Bank of Japan dug its heels in on its easy-money policies Thursday, even while while raising its inflation forecast.
Policymakers have refused to move away measures put in place a decade ago, as the BoJ battles to achieve sustained price rises in the world's third-largest economy.
The BoJ held rates at minus 0.1% and continues buying unlimited government bonds to maintain a low cap on long-term yields.
The pound was quoted at USD1.1962 early Thursday in London, down from USD1.1988 Wednesday.
Away from central banks, Europe's energy crisis is in focus.
Russia on Thursday resumed critical gas supplies to Europe through Germany, reopening the Nord Stream gas pipeline after 10 days, but uncertainty lingered whether the continent could avert an energy crisis this winter.
"It's working," a Nord Stream spokesman said, without specifying the amount of gas being delivered.
The German government had feared that Moscow would not reopen the pipeline after the scheduled work. It believes Russia is squeezing supplies in retaliation for Western sanctions over Moscow's invasion of Ukraine.
According to data provided by Russia's state-owned energy giant Gazprom to Gascade, the German operator of the line, 530 gigawatt hours would be delivered during the day.
This was only 30% of its capacity, Klaus Mueller, president of Germany's energy regulator, the Federal Network Agency, said on Twitter.
Aside from energy supply worries, political turmoil in Italy is also giving the ECB some food for thought. Italy's is the third-largest eurozone economy.
Italian Prime Minister Mario Draghi was expected to resign Thursday after efforts to bring the country's fractious parties to heel failed, kicking off a snap election campaign before the government had even fallen.
The 74-year old will offer his resignation to President Sergio Mattarella, who will likely dissolve parliament and call early elections for September or October, according to political analysts. Draghi may stay on at the head of the government until then.
The former ECB chief, who was parachuted into the PM's seat in 2021 as Italy wrestled with a pandemic and ailing economy, reprimanded his squabbling national unity coalition on Wednesday and urged them back into line before it was too late.
The global economic calendar also has the latest US jobless claims numbers at 1330 BST.
Brent oil was quoted at USD106.20 a barrel early Thursday, down USD107.06 late Wednesday.
Gold stood at USD1,689.29 an ounce, down from USD1,707.88. Gold fell to its lowest level since March 2021 overnight.
"Gold slipped below the USD1,700 per ounce on the back of waning geopolitical tensions. In the absence of news that would trigger massive safe-haven flows, the yellow metal should continue its journey to the south," Swissquote analyst Ipek Ozkardeskaya commented.
In London, Ocado shares recovered from a difficult open to trade 0.8% higher.
The online grocer warned the cost of living crisis will be an "ongoing challenge for the remainder of the year".
Revenue in the six months to May 29 fell 4.4% to GBP1.26 billion from GBP1.32 billion a year earlier. Ocado Group's pretax loss ballooned to GBP211.3 million from GBP27.9 million.
Following a near GBP580 million cash raise, the company said its medium-term financing needs are met. Ocado has "ample liquidity", it said.
Ocado operates a burgeoning tech arm, which provides automation technology, distribution and logistics services to grocers. It also teams with M&S for a grocery joint-venture.
M&S shares were 1.9% lower in early trade. The firm is on the hunt for a new finance boss, as incumbent Eoin Tonge will leave for Primark-owner Associated British Foods.
Tonge replaces John Bason as AB Foods finance director by "no later than February 2023". An official date is yet to be agreed.
M&S said Tonge will serve his notice period, which includes the firm's interim results in November.
A 6.5% share price slide for Dechra, meant it was the worst FTSE 100-listed performer.
The veterinary products firm said it has raised GBP180 million from a placing of 5.2 million shares at 3,430 pence each.
Dechra shares were trading at 3,488.00p and had closed at 3,730.00p on Wednesday.
Sports Direct-owner Frasers rose 16% as it hailed a "record-breaking year".
The retailer swung to an adjusted pretax profit of GBP344.8 million in the year ended April 24 from a GBP39.9 million loss.
Revenue climbed 31% to GBP4.75 billion from GBP3.63 billion.
Frasers said: "We are delighted to report a record-breaking year for Frasers Group with adjusted profit before tax of GBP344.8 million, despite the significant economic headwinds and well-chronicled challenges across the sector. Our elevation strategy has remained laser focused, and we have re-structured our team to execute it with conviction. It is underpinned by our core strengths and rock-solid foundations."
Frasers expects an adjusted pretax profit between GBP450 million and GBP500 million for the new year, potentially a 45% rise.
Also boosting the FTSE 250, and ensuring it outperformed London's large-cap measure, were gains of 4.5% and 4.3% for Volution and Moneysupermarket.
Volution, a manufacturer of energy-efficient indoor air quality products, said it expects adjusted earnings per share for the year to July 31 to be at the upper end of a 22.9-23.8 pence consensus range.
Revenue is tipped to rise 13% to GBP308 million.
Price comparison site operator Moneysupermarket said revenue in the first half of 2022 climbed 19% to GBP193.2 million. Pretax profit was 14% higher at GBP42.1 million.
It said it expects to deliver an adjusted earnings before interest, tax, depreciation and amortisation at the upper end of market expectations.
S4 Capital was less bullish in its outlook. Shares in the advertising agency plunged 49%.
It now targets annual earnings before interest, tax, depreciation and amortisation of GBP120 million, below the current analyst forecast range of GBP154 million to GBP165 million.
For the six months to June, the Martin Sorrell-led ad agency said like-for-like revenue and gross profit/net revenue growth was in line with a full-year run rate expectation of 25%.
S4 explained: "Whilst revenue and gross profit/net revenue growth remain robust, even against very strong comparatives for Q2 2021 (prior year up 66% like-for-like), continued significant investment in hiring and consequent expansion of the company's cost base, particularly in the Content practice, have had a negative impact on first half Ebitda and Ebitda margin.
"With the pattern of profitability already significantly skewed to the second half of the year, and as previously signalled more than the usual two-thirds weighting, this means that the profitability required for the second half of the year to meet market expectations will be even greater."
By Eric Cunha; ericcunha@alliancenews.com
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